U.S. Steel Shares Soared: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Good U.S. economic data combined with economic stimulus in China sent steel stocks higher in early trading, none more so than U.S. Steel (NYSE: X  ) . The mill operator's shares surged early and kept climbing, closing with a 15.5% gain. AK Steel (NYSE: AKS  ) and Allegheny Technologies (NYSE: ATI  ) also rallied on the news.

So what: A Macquarie analyst linked the gains to a move by China to reduce the banks' reserve requirements, MarketWatch reported. Lower reserves could free up cash to lend for capital improvements, thereby increasing demand for steel, iron, and other construction materials.

Now what: Those buying today are taking a small but probably reasonable risk. Sure, China's growth could slow at any time, but U.S. Steel trades for less than 11 times next year's earnings. I think that's a reasonable price, and I'll be backing that up with a CAPScall. Do you agree? Would you buy shares of U.S. Steel at current prices? Please weigh in using the comments box below.

Interested in more information about U.S. Steel? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 30, 2011, at 7:21 PM, mansourg54 wrote:

    I have 10000 shares in X bought at $24 and I am buying more. Why the above comments/analysis di not appear when X stock was trading at $64 earlier this year.

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